Coffee Day Enterprises raised Rs 1,150 crore from investors last month. The issue was subscribed 1.81 times, but the non-institutional category and retail investors remained on the sidelines.

The stock of Coffee Day Enterprises (CDEL), which runs the Cafe Coffee Day chain of outlets, tanked nearly 18% on its debut on Monday, making it the worst opening for a company listing on the bourses in calendar 2015. Amidst the weakness in secondary markets, the Bengaluru-based company ended the session at Rs 270.15 per share, down Rs 57.85, or 17.63%, from its issue price of Rs 328. A little more than 2.21 crore shares exchanged hands on the BSE and NSE, exchange data showed.

Coffee Day Enterprises raised Rs 1,150 crore from investors last month. The issue was subscribed 1.81 times, but the non-institutional category and retail investors remained on the sidelines.

Market watchers said the recent bout of correction in equity markets soured the CDEL debut. Indian equities declined for the sixth consecutive session on Monday and the Sensex has lost nearly 950 points or 3.5% in the last one week. “The timing was unfortunate,” observed one merchant banker who, however, conceded the issue may have been somewhat aggressively priced. The poor listing is, however, unlikely to hurt other debutants, investment bankers said, pointing out the fundamentals of other companies were better. InterGlobe Aviation, the parent company of the country’s biggest airline, IndiGo, priced its initial public offering (IPO) at Rs 765 per share on Monday, raising Rs 3,010 crore. The stock is expected to list on the exchanges by the second week of  November. So far in 2015, 18 companies have raised more than Rs 11,000 crore from the primary markets — the highest in five years.

Although CDEL operates the largest chain in the country with over 1,500 outlets across more than 200 cities and is a vertically integrated business since the group grows its own coffee,  analysts had pointed out that coffee retailing accounted for less than a third of the capital employed.

CDEL had been posting losses for the last three years (FY15 net loss at Rs 87 crore) because of high depreciation—the capital cost of adding stores is high — and interest costs. The company had proposed to use more than half of its proceeds from the public issue towards repayment of debt, especially for the holding company which had borrowed to acquire additional stakes in the coffee retailing and other businesses.

Mumbai-based Ambit Capital had observed “the coffee is frothy’, further highlighting that the coffee business had posted a very limited operating leverage despite being the largest coffee retailer in the country.

“All the businesses have a history of poor RoCE. Capital allocation to and utilisation of free cash flows from the coffee business to non-coffee businesses is a risk… The company plans to use these funds for mostly repayment of debt and that too for the holding company which took on debt to acquire additional stakes in the coffee retailing business or other businesses such as Mindtree,” the brokerage wrote in a note.

The non-instutional category comprising high net-worth individuals (HNIs) was subscribed 0.54 times, with financiers perceiving margin funding as risky in a weak market scenario. The retail book was subscribed 0.9 times, stock exchange data showed.

Low steam
* Worst opening for a company listing on the bourses in calendar 2015
* Issue subscribed 1.81 times, but non-institutional and retail investors remained on sidelines
* Experts say recent bout of correction in equity markets soured the debut

The Q2 profit of Kotak Bank (Rs 940 crore) was broadly in line as loan growth picked up (8% QoQ), NIMs improved (10 bps QoQ) and non-bank subs showed healthy traction. NPL provisions (~80 bps) were still high, in line with the guidance to provide for stressed erstwhile ING book.

Combined loan book grew strong 8% QoQ driven by healthy traction from most of the retail segments. Management guided for strong 20% YoY loan growth for the full year. NIMs improved (to 4.3%) supported by rise in CASA ratio (~200 bps QoQ to ~36%).

Profitability of the bank (ROA of 1.3%) is still muted as fee inc is weak and cost to income (~55%) is high as well.
Opex normalised to an extent as merger related expenses were down (R12 crore vs R63 crore in 1Q) and one-time retirement benefit of R340 crore taken last quarter. PPoP/assets improved to 2.4% but remained lower vs peers.

Profitability of the bank (ROA of 1.3%) is still muted as fee income (1.4%) was weak and cost to income (~55%) is high as well. While the merger remains on track with more products being launched at erstwhile ING branches, the full synergy benefit is likely to become visible only from 4Q onwards.

ROEs may rebound back to ~16-17% in FY17/18E.

Fund research company Morningstar said on Monday it had cut its analyst rating on Templeton’s Emerging Markets Investment Trust to Neutral after the departure of Mark Mobius as the fund’s lead manager.

Emerging markets veteran Mobius had said in July he would step down from his role at the investment trust from October, while continuing to lead Templeton’s broader emerging markets group. The trust was worth u00a31.4 billion at the end of September.

Morningstar had at the time rated the fund Bronze – the third highest positive rank after Gold and Silver. These ratings reflect an analyst’s conviction that a fund can outperform its peer group or a benchmark on a risk-adjusted basis over the long term. Those three grades are followed by Neutral and Negative.

The rating was placed under review after Mobius said he was handing over day-to-day management of the trust.

Jeremy Beckwith, Morningstar’s director of manager research, UK, said that while the trust’s new leaders, Carlos Hardenberg and Chetan Seghal, were experienced investors, neither had run a large-cap global emerging markets fund.

“In addition the Templeton Emerging Markets investment process is changing, and this fund will now be run on a more diversified and risk-conscious basis than previously,” Beckwith said.

“With a restructuring of the relationship between analyst and portfolio managers as well, there is too much change occurring on this fund to warrant a positive rating.”

Franklin Templeton did not immediately comment in response to the announcement.

Emerging markets have performed poorly this year as a result of slowing economic growth across the developing world and the potential impact of a looming U.S. interest rate rise.

Templeton’s website showed that the investment trust’s share price had fallen 30 percent in the year to Sept. 30, 2015.

L&T share price fell as much as 2.5% intraday after brokerage houses HSBC, Citi and Barclays downgraded rating of the engineering and construction major citing decline in new order growth and expensive valuations. (Photo: PTI)

Larsen & Toubro (L&T) share price fell as much as 2.5 per cent intraday after brokerage houses HSBC, Citi and Barclays downgraded rating of the engineering and construction major citing decline in new order growth and expensive valuations.

At 1.54 pm, L&T was trading 2.21 per cent down at Rs 1,379.90. The scrip opened at Rs 1,403 and had touched a high and low of Rs 1404 and Rs 1375.50, respectively, in trade so far. Sensex was down 0.80 per cent at 26,443.41.

L&T has already cut its 2015-16 new orders growth guidance to 5-7 per cent and cut sales growth guidance to 10-15 per cent on Friday.

Barclays cuts rating of L&T to ‘equal weight’ from ‘overweight’ and reduced L&T target price to Rs 1,523 from Rs 1,788 earlier. Citi downgraded L&T rating to ‘neutral’ from ‘buy’ and cuts target price to Rs 1,549 from Rs 1,746 earlier.

Similarly, HSBC also reduced L&T rating to ‘hold’ from ‘buy’ and cuts price target to Rs 1,490 from Rs 1,793 earlier.

(With inputs from Reuters)

IDFC registered a net loss of Rs 1,468.83 crore on a consolidated basis for the September quarter.

Shares of IDFC Ltd on Monday plunged over 7 per cent after the company registered a net loss of Rs 1,468.83 crore on a consolidated basis for the September quarter.

The stock dived 6.63 per cent to Rs 54.90 — its 52-week low — on BSE. On NSE, shares of the company tumbled 7.22 per cent to hit its one-year low of Rs 54.60.

The company had posted a net profit of Rs 421.4 crore in the same quarter last fiscal.

But total income of IDFC increased to Rs 2,512.90 crore in the quarter under review, from Rs 2,487.46 crore in the same period a year ago, the bank had said in a regulatory filing on Saturday.

On a standalone basis too, the company posted a net loss of Rs 1,411.38 crore in July-September of this fiscal as against a net profit Rs 470.15 crore a year ago.